KiwiSaver may seem like a minefield for employers to understand and administer. To help you understand your obligations and options please read through these topics:
In a nutshell your obligations as an employer include making sure KiwiSaver is available to all your employees who want to join, making deductions from their pay, making employer contributions, and forwarding these deductions and contributions to Inland Revenue with your PAYE schedule.
Employers have an obligation to allow employees to join KiwiSaver through the workplace. There are three ways employees can join:
1. New employee automatic enrolment
This applies to the majority of new permanent employees (including part-time employees) aged between 18 and 65 and requires employers to automatically enrol them in KiwiSaver and start deducting contributions at the rate of 3%, 4% or 8% from their gross pay, from the employee's first pay. Employers are also required to make a contribution of 3%.
Some people are not required to be automatically enrolled, you can find information about which employees the exemption applies to on the Inland Revenue website.
Employers need to complete an Inland Revenue KiwiSaver employee details form (KS1) for each new employee who is required to be automatically enrolled, and send this to Inland Revenue to register the employee within seven days of employment. Employers are required to send this form to Inland Revenue even if the employee has indicated that they will opt out of KiwiSaver.
The employer must also provide the employee with the Inland Revenue KiwiSaver employee information pack (KS3). This provides the employee with information about KiwiSaver and what their options are. If the employer has chosen a KiwiSaver scheme provider for their workplace they must also notify the employee of which scheme that they will be allocated to, as well as provide them with a copy of the scheme’s current investment statement.
A new employee can opt out of KiwiSaver as long as they complete the Inland Revenue New employee opt-out request form (KS10) and return it to Inland Revenue before the end of their eighth week of employment. (Note this is the employee’s responsibility, not the employer’s.)
All of the Inland Revenue forms mentioned above are available for free download from Inland Revenue’s website.
Once the opt-out request has been processed, Inland Revenue will refund all employee contributions directly to the employee and employer contributions will be refunded directly to the employer.
2. Opt in through an employer
Existing employees can also join KiwiSaver by completing the Inland Revenue KiwiSaver deduction form (KS2) and giving it to the employer to start making deductions from their next pay. This is called opting in through an employer. Employers need to complete an Inland Revenue KiwiSaver employee details form (KS1) for each new employee who has opted in and send this to Inland Revenue to register the employee.
The employer must also provide the employee with the Inland Revenue KiwiSaver employee information pack (KS3). This provides the employee with information about KiwiSaver and what their options are. If the employer has chosen a KiwiSaver scheme provider for their workplace they must also notify the employee of which scheme they will be allocated to, as well as provide them with a copy of the scheme’s current investment statement.
If an employee opts in, they cannot opt out.
3. Active choice enrolment with a provider
An employee can join KiwiSaver directly with a scheme provider of their choice. The scheme provider will notify Inland Revenue that the employee has opted in to KiwiSaver. Inland Revenue will then notify the employer to start making KiwiSaver deductions and, for eligible employees, compulsory employer contribuitons from the employee’s next pay. The employer is obligated to act upon this instruction.
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What to do with KiwiSaver contributions
1. Filing to Inland Revenue
Employers have to forward employee and employer contributions to Inland Revenue. This is done through the employer monthly schedule (EMS) process that also includes PAYE deductions. The EMS forms have columns added for both employee and employer contributions.
The contributions are paid to Inland Revenue with the other payments shown on the EMS, such as PAYE and student loan deductions. Inland Revenue are responsible for sending the contributions to the relevant KiwiSaver scheme provider.
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Employers have to contribute to their employees' KiwiSaver accounts, at the rate of 3% of the employee’s gross wages or salary unless the employee is not eligible to receive employer contributions. You can find more information on the Inland Revenue website.
The employer contributions to KiwiSaver are subject to employer superannuation contribution tax (ESCT).
The employee has to contribute a minimum of 3% to qualify for the matching employer contribution.
There is no obligation for an employer to contribute to an employee’s KiwiSaver account if the employee is on a contributions holiday, if the employee is aged under 18, or if the employee is over 65 and eligible to withdraw from KiwiSaver.
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Employees can choose to contribute either 3%, 4% or 8% of their gross pay. The employee contribution rate can be changed by the employee once every three months, or more frequently if the employer allows.
After an employee has been a member for a minimum of twelve months they can apply to Inland Revenue to take a contributions holiday for any duration between three months and five years.
Inland Revenue will send the employer a letter informing them of the employee’s request to take a contributions holiday and the duration. The employer must comply with this request and stop making KiwiSaver deductions from the employee’s pay. After the contributions holiday has expired, the employer must reinstate the deductions unless Inland Revenue advise otherwise. Employers are not required to make contributions while an employee is on a contribution holiday.
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1. Default providers
It is up to the employee to choose a KiwiSaver scheme provider. If they do not make an 'active choice' or if their employer has not chosen a provider for their employees, they will default to one of the Government-selected default providers.
2. Employer Choice provider
An employer can voluntarily choose a provider for their business. This does not mean that employees have to use this chosen provider. However, if the employee does not make an active choice they will 'default' to the employer’s chosen provider, instead of one the Government-selected default providers.
If the employee defaults to the employer’s chosen provider, the employee can change providers at a later date by making an active choice.
If you‘d like to set up an Employer Choice agreement with the Kiwi Wealth KiwiSaver Scheme, fill in our form.
3. Providing financial advice
Employers should not provide advice to employees about which KiwiSaver scheme or provider to choose. Instead employers can encourage employees to contact an authorised financial adviser (AFA).
If an employer chooses a scheme provider for their business they must make sure that any employee who joins KiwiSaver through the workplace is notified which provider they have chosen and given a copy of the provider’s current scheme investment statement.
The employer must explain that the employee will be allocated to this provider only if they do not make an active choice and choose their own provider.
The employer must not coerce the employee to join a particular KiwiSaver provider or scheme or provide the employee with financial advice. If the employee asks for more information about the business‘s chosen provider it is appropriate for the employer to direct them to the provider or to an AFA to make their own enquiries.
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Existing workplace superannuation schemes (non-KiwiSaver)
If an employer already operates a work-based superannuation scheme there are a number of things to consider – such as whether to keep the existing scheme running, wind it up, or make it KiwiSaver compliant or exempt.
Employers are welcome to contact us on 0800 427 384 during business hours to discuss their options.
Need more help?
If you have a question or a suggestion for a topic not already covered here, please email us and we’ll get back to you with a response.
Employer Choice agreements
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